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HP cuts base pay for execs and employees
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HP cuts base pay for execs and employees
Amid a tough fiscal first quarter report and weaker than expected demand, HP is cutting base pay for executives and its workers.
The cost cutting was mentioned by HP CEO Mark Hurd on the company’s earnings conference call on Wednesday. HP met Wall Street expectations in the first quarter, but sales and the outlook for the second quarter disappointed. Hurd said:
During the quarter we took a number of actions to reduce expenses including extending the December holiday shutdown, significantly reducing travel and eliminating other discretionary spending. We will continue to take actions to create a more variable cost structure including reducing base pay and certain benefits across the company beginning in Q2.
Consistent with our philosophy for pay for performance we intend to increase variable pay in total if HP meets its FY09 financial objectives. These actions will increase the company’s flexibility to more effectively scale our expenses to our revenues in this difficult environment.
A memo from Hurd obtained by ZDNet reveals some more detail. Specifically, HP will implement the following pay changes:
* Hurd’s base pay falls 20 percent. (Hurd’s salary was $1.45 million in 2008).
* Base pay of executive council members falls 15 percent.
* Other executive pay will fall 10 percent.
* Base pay from other exempt employees falls 5 percent.
* Base pay for non-exempt employees falls 2.5 percent.
* 401(k) and share ownership plans swill change.
Here’s the full memo:
Today, HP announced first quarter results amid one of most difficult economic downturns that any of us has ever faced. I am proud to say that we continue to execute well in this very challenging environment.
We grew revenue 1 percent year-over-year, or 4 percent in local currency, and you need to look at these numbers a little differently this quarter. For the first time in a long time, the dollar was strengthening, so the currency conversion was actually a headwind for us. We also continued to show strong operating leverage with non-GAAP operating profit up 10 percent year-over-year. This was a solid performance, and I thank all of you for your efforts.
But really, Q1 was like a tale of two companies.
HP Services — as a result of EDS and TS — had a strong quarter, delivering virtually all of the local currency revenue growth and more operating profit than any other business. It’s gratifying, because this performance was possible because of the hard work we’ve been doing to restructure those businesses.
When you take HP services out of the mix, it’s a very different picture. PSG had revenue down 19%. ESS had revenue down 18%. IPG had revenue down 19%. In fairness, across IT and even other industries, product businesses are struggling in this economic climate. And we did gain share in key market segments. PSG and ESS gained roughly 1 and 3 points of share, respectively. In IPG, quite frankly, we still have work to do across a number of dimensions like inventory, both owned and channel inventory.
In an environment like this, there’s no margin for error and no tolerance for inaction. To give you a little insight into my world, after we report our earnings, we engage in a dialogue with analysts and investors. They’re going to ask what we’re doing in light of the current environment to right-size these businesses.
The math is pretty straight forward. From a productivity standpoint, you’re supposed to reduce headcount on par with declining revenue. If you believe the environment isn’t going to improve, you should take a bigger cut to get in front of the problems. You can do the calculation, as easy as I can. We have about 100,000 people in our product businesses, with revenue down roughly 20%, and an environment that may not get any better in 2009.
I’ll be asked by investors, “Where’s the job action, where are you taking out this roughly, 20,000 positions?” Well, I don’t want to do that. When I look at HP, I don’t see a structural problem of that magnitude. There are pockets where restructuring needs to happen, and areas where actions will be taken as part of our ongoing workforce optimization process. But at a company-wide level, I don’t believe a major workforce reduction is the best thing for HP at this time.
I think we are fundamentally sound, and when the economy picks up, I want HP to be strong, and to take share and to outgrow the market. I said it last quarter, my goal is to keep the muscle of this organization intact. But we do have to do something…because the numbers just don’t add up and we need to have the flexibility to make the right long-term investments for HP.
So we are going to take action. We have decided to further variablize our cost structure by reducing base pay and some benefits across HP. My base pay will be reduced by 20 percent. The base pay of Executive Council members will be reduced by 15 percent.....
Source:
http://blogs.zdnet.com/BTL/?p=13168
The cost cutting was mentioned by HP CEO Mark Hurd on the company’s earnings conference call on Wednesday. HP met Wall Street expectations in the first quarter, but sales and the outlook for the second quarter disappointed. Hurd said:
During the quarter we took a number of actions to reduce expenses including extending the December holiday shutdown, significantly reducing travel and eliminating other discretionary spending. We will continue to take actions to create a more variable cost structure including reducing base pay and certain benefits across the company beginning in Q2.
Consistent with our philosophy for pay for performance we intend to increase variable pay in total if HP meets its FY09 financial objectives. These actions will increase the company’s flexibility to more effectively scale our expenses to our revenues in this difficult environment.
A memo from Hurd obtained by ZDNet reveals some more detail. Specifically, HP will implement the following pay changes:
* Hurd’s base pay falls 20 percent. (Hurd’s salary was $1.45 million in 2008).
* Base pay of executive council members falls 15 percent.
* Other executive pay will fall 10 percent.
* Base pay from other exempt employees falls 5 percent.
* Base pay for non-exempt employees falls 2.5 percent.
* 401(k) and share ownership plans swill change.
Here’s the full memo:
Today, HP announced first quarter results amid one of most difficult economic downturns that any of us has ever faced. I am proud to say that we continue to execute well in this very challenging environment.
We grew revenue 1 percent year-over-year, or 4 percent in local currency, and you need to look at these numbers a little differently this quarter. For the first time in a long time, the dollar was strengthening, so the currency conversion was actually a headwind for us. We also continued to show strong operating leverage with non-GAAP operating profit up 10 percent year-over-year. This was a solid performance, and I thank all of you for your efforts.
But really, Q1 was like a tale of two companies.
HP Services — as a result of EDS and TS — had a strong quarter, delivering virtually all of the local currency revenue growth and more operating profit than any other business. It’s gratifying, because this performance was possible because of the hard work we’ve been doing to restructure those businesses.
When you take HP services out of the mix, it’s a very different picture. PSG had revenue down 19%. ESS had revenue down 18%. IPG had revenue down 19%. In fairness, across IT and even other industries, product businesses are struggling in this economic climate. And we did gain share in key market segments. PSG and ESS gained roughly 1 and 3 points of share, respectively. In IPG, quite frankly, we still have work to do across a number of dimensions like inventory, both owned and channel inventory.
In an environment like this, there’s no margin for error and no tolerance for inaction. To give you a little insight into my world, after we report our earnings, we engage in a dialogue with analysts and investors. They’re going to ask what we’re doing in light of the current environment to right-size these businesses.
The math is pretty straight forward. From a productivity standpoint, you’re supposed to reduce headcount on par with declining revenue. If you believe the environment isn’t going to improve, you should take a bigger cut to get in front of the problems. You can do the calculation, as easy as I can. We have about 100,000 people in our product businesses, with revenue down roughly 20%, and an environment that may not get any better in 2009.
I’ll be asked by investors, “Where’s the job action, where are you taking out this roughly, 20,000 positions?” Well, I don’t want to do that. When I look at HP, I don’t see a structural problem of that magnitude. There are pockets where restructuring needs to happen, and areas where actions will be taken as part of our ongoing workforce optimization process. But at a company-wide level, I don’t believe a major workforce reduction is the best thing for HP at this time.
I think we are fundamentally sound, and when the economy picks up, I want HP to be strong, and to take share and to outgrow the market. I said it last quarter, my goal is to keep the muscle of this organization intact. But we do have to do something…because the numbers just don’t add up and we need to have the flexibility to make the right long-term investments for HP.
So we are going to take action. We have decided to further variablize our cost structure by reducing base pay and some benefits across HP. My base pay will be reduced by 20 percent. The base pay of Executive Council members will be reduced by 15 percent.....
Source:
http://blogs.zdnet.com/BTL/?p=13168
